Brexit negotiations phase two '“ here's what happens next

The European Commission will advise the leaders of the 27 EU member states meeting at the European Council on December 15 to proceed with the second phase of Brexit negotiations. It judges there has been sufficient progress on the three key issues that it insisted should constitute the first phase of talks. Those are citizens’ rights, the Irish border and the UK’s financial settlement.

That doesn’t mean that a final solution has been achieved on any of these issues – just that there is enough common understanding between the EU27 and the British government to continue to the next phase of negotiations.

So, what next? Expect more of the same: time pressures, a well-choreographed approach from the EU leadership and a weak British government gradually converging with the European position.

Remit of the second phase

Brexiteers may be surprised to find that the second phase of negotiations will not focus on a future trade agreement between the UK and the EU, but on settling the UK’s withdrawal from the EU. Although that Brexit agreement must take into consideration the future EU-UK relationship, including trade.

Solutions will first be needed for the three issues negotiated during the past six months. Michel Barnier, the EU’s Brexit negotiator, has recommended that a strand of these negotiations should focus specifically on the Irish border issue.

On citizens’ rights, there appears to be an overarching agreement between the UK and the European Commission. However, the European Parliament still has concerns about what role the EU Court of Justice will play in dealing with these rights. It also wants greater clarity on whether UK citizens will still be able to move freely in the EU after Brexit, on the process to obtain “settled status” in the UK, as well as whether rights will be extended to the future partners of EU citizens. The European Parliament’s view matters as it has to ratify the eventual Brexit deal. Whether the EU27 incorporate these issues into the phase two negotiating agenda will become clearer at the European Council next week.

The UK’s financial settlement needs to be drawn up during the second phase of the negotiations too. The methodology for working out the final outstanding bill (estimated to be between €40bn to €60bn) has been settled but the final figure and the payment schedule have yet to be agreed.

Another negotiation strand will focus on the British government’s vision for its future relationship with the EU – which has been vague to date. The UK chancellor (finance minister), Philip Hammond, confirmed in early December that the cabinet has not yet discussed the issue. EU officials will want more clarity to ensure that the withdrawal agreement is informed by that future deal – and crucially to decide the terms of any transition period. The UK has requested a two-year transition period during which it will remain part of the single market and customs union.

The Brexit negotiations in phase two will also cover the UK’s withdrawal from Euratom – the European atomic energy community – and any future cooperation on security, defence, foreign policy, terrorism and international crime, as well as the role of the Court of Justice of the EU in the governance of the Brexit agreement.

The clock is ticking

As with the previous phase of the negotiations, the ticking Brexit clock puts pressure particularly on the UK government. There are ten months left to complete the negotiation of the UK’s withdrawal agreement. Michel Barnier has made it clear that this agreement needs to be ready by October 2018 so that it can be ratified by the member states and the European Parliament by 29th March 2019 – the deadline that marks two years since the UK triggered Article 50, giving notice of its intention to withdraw.

It has taken six months to sufficiently converge on three fundamental issues so it is difficult to foresee how the outstanding items, including a vision for the future UK-EU relationship, can be solved within ten months. Article 50 allows for an extension of the negotiation process, that can be agreed between the UK and the EU at any point during the Brexit negotiations. But this in-built flexibility tool will be difficult for the UK government to deploy given its promise to incorporate the time and date of Brexit into the EU Withdrawal Bill.

The UK’s commitment to find a no-border solution on the island of Ireland means that leaving the EU without a deal is no longer an option. Moreover, soft Brexit is the only outcome that can deliver such a solution. The UK has unnecessarily cornered itself into negotiating a Brexit agreement within ten months, so disagreements at home, late-night trips to Brussels and last-minute deals are likely to become the norm.

Power asymmetry

The Brexit process is not an ordinary international negotiation. Article 50 was designed as a deterrent and once triggered it places the balance of power firmly with the EU. The experience of the past six months illustrates the power asymmetry between the UK and the EU27. The EU27 has maintained a solid, unified voice while earlier concerns about a Bexit domino effect across the continent have been assuaged.

The British government wasted its bargaining advantage by triggering article 50 in March 2017 despite being unprepared for the magnitude of the negotiations ahead. Since then, it has been weakened by a reduced majority in parliament and its dependence on the Northern Irish Democratic Unionist Party and an absence of a concrete vision of its future relationship with the EU.

“The most difficult challenge is still ahead”, European Council president, Donald Tusk, warned referring to the next phase of negotiations. The EU27’s unity will be tested now because national preferences are likely to become more obvious in the next phase. But as has been the case thus far, the pressure – from various conflicting interests – will very much remain on the UK government.